My second chapter addresses the efficiency issues arising from the externalities and hidden-action features of search effort. The solution to the social planner's problem may not be decentralized in a competitive market. Calibration shows that the current US unemployment insurance (UI) system generates an 8.07% welfare loss relative to the socially optimal allocation.with 01, , IrIrIr a agt;0. In Christensen et al (2005), the offer arrival rate function for the
employed does not have the parameter _ Ir . The inclusion of _ Ir in my model is
crucial because the ATUS data show that the fraction of employed workers whoanbsp;...